Chinese Regulators to Combine QFII, RQFII from 1 November

The move to combine the QFII and RQFII into a single ‘qualified foreign investor’ regime is aimed at further easing foreign access to China’s capital markets. 

The CSRC (China Securities Regulatory Commission), PBOC (People’s Bank of China), and SAFE (State Administration of Foreign Exchange) on Friday (25 September) announced it will combine the QFII and RQFII programmes starting from 1 November.

China launched the QFII program in 2002 and the RQFII program in 2011, allowing foreign institutional investors to trade in the country’s stock and bond markets under certain quotas. The quotas were removed in May.

The move to combine the two major inbound investment programmes into a single ‘qualified foreign investor’ regime is aimed at further easing access to China’s capital markets for foreign institutional investors.

The CSRC consulted on the changes in January 2019.

The changes include:

  • simplified application procedure, including relaxed qualification and documentary requirements
  • simplified review procedure and shorter review cycle, i.e. the CSRC will make a decison on approval within 10 business days of receiving an application
  • removal of a restriction on the number of intermediaries servicing a qualified foreign investor, i.e. qualified foreign investors with more than 2 custodians shall designate one as the principal reporter
  • enhanced supervision over the reporting and filing of qualified foreign investors, i.e. CSRC and PBOC will oversee domestic securities and futures investment; PBOC and SAFE will monitor bank accounts in China and cross-border funds transfers
  • reduced requirements for data submission, i.e. opening and closure of accounts, cross-border funds transfers, asset allocation in the domestic markets; international payments declaration/statistics

In addition, the investment scope will be expanded to include more asset types – including NEEQ securities, private investment funds, asset-backed securities, financial futures, commodity futures, options, bond repo transactions, margin trading and securities financing on stock exchanges, and securities lending.

Under the measures, the CSRC will consult the PBOC and the SAFE regarding the types of financial derivatives and related trading models available to qualified foreign investors and issue a notification in due course.

The new measures are available here.

The CSRC has simultaneously released an additional document outlining the steps qualified foreign investors need to take to invest in domestic securities and futures, and other provisions related to such investment.

The document is available here.

Earlier in the day on Friday, FTSE Russell announced it will start including Chinese government bonds in the FTSE World Government Bond Index (WGBI) starting in October 2021.

Separately, SAFE (State Administration of Foreign Exchange) has granted fresh quotas under its outbound QDII scheme for the first time since April 2019.

USD 3.36 billion in quotas was granted to 18 institutions, allowing them to invest these funds in offshore financial markets. The new limits took the total amount granted under the QDII scheme to USD 107.34 billion between 157 institutions.

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